The two most common forms of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 bankruptcy can be filed by an individual or a business. Chapter 13 is used only by individuals. A Chapter 7 bankruptcy will allow you to wipe out most of your debts without any repayment. In order to do so, the bankruptcy court may have to liquidate some of your assets (depending on what you own). A Chapter 13 bankruptcy is a repayment and reorganization plan. You will pay back a percentage of the debt that you owe over a three to five year period. Because you are paying some of the debt back, you will not have to liquidate your assets. A Chapter 13 bankruptcy will close, or discharge, once you have reached the completion of your plan – about three to five years.
This is a typical fear of bankruptcy filers, but it is certainly not true. If you file Chapter 7 bankruptcy, you will be allowed to keep many of your assets. These are called exempt assets and are determined by each state’s exemption laws. For example, in Arizona, wedding rings, musical instruments, retirement accounts, and vehicles can all be exempted.
No matter what legal issue you have, you are never required to have an attorney, but it is always helpful to have someone with legal knowledge to assist you. Filing for bankruptcy is no different. As attorneys who have practiced in bankruptcy for our entire careers, we know that even a “simple” bankruptcy can have its issues. It’s when the unexpected issues arise that it is helpful to have someone with you who knows the bankruptcy laws and can make the right decisions to correct those issues. While a bankruptcy might be “simple,” the bankruptcy laws are complex, and it is always better to have an experienced attorney at your side.
Most bankruptcy attorney’s fees are reasonable and affordable. At Perez Law Group, PLLC, we offer a flat fee to file. There is no hourly billing or “extra fees.” Determination of an exact fee is based on the complexity of each case, and we are always willing to work with our clients and offer payment plans.
No, bankruptcy will not be a black mark on your credit forever. It will have some effect, but nothing that you cannot quickly repair. Typically, a Chapter 7 bankruptcy remains on your credit report for 10 years after you file. A Chapter 13 remains for 7 years. However, your credit score will begin to repair itself after about 2-4 years, and you will be offered new extensions of credit. There are some simple things you can do to facilitate your credit repair: you can reaffirm secured debts (like a car payment) and remain current on those payments or you can maintain an unsecured card with a small balance and pay it off each month. Yes, your credit score is important, but if you are already behind on payments, it is most likely that your score isn’t going to improve on its own. Bankruptcy can be a tool to get a fresh start and clean slate to begin repairing your credit today.
Here are just a few of the benefits of a bankruptcy filing:
- A stop to all collection proceedings. When a bankruptcy petition is filed, an automatic stay of protection goes into place that prevents any creditor from collecting on its debt. That means a bankruptcy can stop harassing creditor calls, wage garnishments, an even foreclosure proceedings.
- A Chapter 13 bankruptcy will reorganize your debts, including mortgage arrears. So, if you are behind on your mortgage and want to keep your home, bankruptcy can help you pay those arrears over a three to five year period and bring your mortgage current.
- If you have had a judgment lien put on your property, in some cases, a bankruptcy can avoid these liens and free up equity in the property.
- Not all taxes are dischargeable in bankruptcy, but many can be discharged in a Chapter 7. If your taxes are non-dischargeable there are ways to pay them through a Chapter 13 bankruptcy.